Richard J. Shurtz, Attorney at Law

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What if your bankruptcy isn??t working for you?

In many cases, Washington residents file for personal bankruptcy in the hopes that the process will lead to the elimination of debt or the ability to reorganize their existing obligations in a more manageable way. However, each type of bankruptcy offers different protections and tools, and it is important to select the right path when deciding how to file. In some cases, consumers find that the path they set out upon is not the best one to a debt-free future.

For example, many homeowners choose to file for Chapter 13 bankruptcy in an effort to save their home from foreclosure. They do so because Chapter 13 allows them the opportunity to restructure their outstanding financial obligations, while also putting a stop to any pending or ongoing foreclosure action. The borrower then has a period between three and five years in which to repay the debts held within the filing.

The problem arises when the consumer finds that he or she is unable to meet the mortgage payments, even after filing for Chapter 13. While this form of bankruptcy can forestall a home foreclosure, it cannot do so indefinitely. At some point the homeowner must make good on their mortgage, in addition to covering the other debts included within the bankruptcy case.

When a Washington resident is simply unable to make his or her mortgage payments, it may be time to consider walking away from the home and altering the bankruptcy process. If certain income restrictions are not exceeded, individuals can convert their Chapter 13 bankruptcy to a Chapter 7. Doing so can lead to the discharge of many forms of consumer debt, which can make a world of difference in one's monthly budgeting.

Source: Fox Business, Can I Walk Away From Home in Bankruptcy?, Justin Harelik, Dec. 11, 2013

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